mbs market strategies - the baker group · mbs market strategies january 2015 page 1 drew simmons...

Oklahoma City, OK | Austin, TX | Birmingham, AL | Indianapolis, IN | Salt Lake City, UT | Springfield, IL | www.GoBaker.comThe Baker Group | 1601 Northwest Expressway, 20th Floor | Oklahoma City, OK 73118 | 800.937.2257 | Member FINRA and SIPC

MBS Market Strategies

January 2015

Drew SimmonsVice President

[email protected] 2015 - Prepayment Summary

December SpeedsAgency MBS speeds increased for most terms and coupons in December with the biggest gains in 30yr collateral. Fannie 30yrs experienced a 1.9 CPR increase to 13.5 while Freddie 30yrs were up 1.6 CPR to 13.8. Fannie and Freddie 15yrs reached double digits for the first time since July to 10.3 and 10.1 CPR respectively. Within 10yrs, Fannies increased 1.2 CPR to 11.3 and Freddies inched up 0.6 CPR to 10.5. Twenty-year terms increased 1.5 CPR to 10.6 for Fannie while Freddie 20yrs increased 1.4 CPR to 10.7. Ginnie I 30yrs gained 1.1 CPR on the month to 16.7 and Ginnie II 30yrs increased 1.7 CPR to 17.1. Fifteen-year Ginnie Is increased 1.3 CPR to 13.2 while Ginnie II 15yrs notched up 0.6 CPR to 12.6. Hybrid Ginnie 3x1s experienced a 4.6 CPR spike to 23 CPR with aggregate 5x1s up 2 CPR to 22.4.

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14FNMA 9.2 8.4 10 10.5 11 12.3 12.7 12 11.9 11.9 11.5 13.5FHLMC 9.9 8.9 10.5 10.9 11.5 12.6 13 12.4 12 12.4 12.2 13.8GNMA I 12.5 12.6 13.7 16.2 17.3 17.5 17.9 16.9 16.5 16.5 15.6 16.7GNMA II 8.6 8.9 10.1 11.6 12.8 14 14.3 14.1 14.1 14.5 15.4 17.1

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1-mo CPR

30-Year Fixed MBS Historical Prepayment Speeds

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

FNMA 6.7 6.3 7.7 8.2 8.6 10.1 10.8 9.8 9.9 9.9 9.1 10.6FHLMC 7.5 6.9 8.1 8.6 9.2 10.6 10.8 10.2 9.9 10.4 9.2 10.7

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1-mo CPR


Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14FNMA 7.7 7 8.3 8.8 9.4 10.2 10.7 9.9 9.7 9.8 8.8 10.3FHLMC 8 7.3 8.5 9 9.6 10.5 10.7 10.3 9.3 10 9.2 10.1GNMA I 10.2 9.1 11 12.2 13 13.4 13.7 13.1 13.6 13.3 11.9 13.2GNMA II 7.2 7.4 8.9 10.5 10.6 11.5 12.8 11.4 11.8 12.4 11.9 12.6

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FNMA 9.1 8.2 9.8 10 10.3 11.3 11.7 11.2 10.8 11 10.1 11.3FHLMC 9.2 7.5 9.1 10 10.5 10.9 10.9 11.1 9.9 11 10 10.5

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15-Year by Issuer

FNMA FHLMC GNMA I GNMA II

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FNMA FHLMC GNMA I GNMA II

January 2015


MBS Market Strategies Specified Pools

Loan SizeDecember’s speeds showed a continued increase in higher loan balances. For Fannie 15yr 4s of 2010, the $225K+ group increased the most, up 2.6 CPR to 17.5. The $225K+ group also led the way within Fannie 30yr 4.5s of 2010, up 3.7 CPR to 19.8. All loan size groups within these cohorts were up on the month with the exception of $175K-$225K pools which fell 3 CPR to 11.5 for 15yrs while 30yrs fell 6 CPR to 10.5.

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CPR

FNMA 15-Year 2010 4s by Loan Size

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+

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FNMA 30-Year 2010 4.5s by Loan Size

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+ Cohort3mo 12.3 12.9 12.9 14.4 11.5 16.1 15.16mo 12.6 13.1 13.4 14.9 15.3 16.5 15.612mo 12.2 12.8 13.2 14.8 15.3 15.8 14.912mo Prepay Ratio 0.82 0.86 0.89 0.99 1.03 1.06 1.00

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Prepay Ratio CPR

FNMA 15-Year 2010 4s by Loan Size - Avg CPRs (left) | 12mo Prepay Ratio (right)

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+ Cohort3mo 10.5 11.3 12.7 13.1 13.2 17.6 16.56mo 11.1 11.8 13.1 13.9 14.1 17.3 16.412mo 10.4 11 11.8 12.5 13.4 15 14.312mo Prepay Ratio 0.73 0.77 0.83 0.87 0.94 1.05 1.00

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Prepay Ratio CPR

FNMA 30-Year 2010 4.5s by Loan Size - Avg CPRs (left) | 12mo Prepay Ratio (right)

January 2015



Investor PoolsFannie 15yr and 30yr 2010s with 50-100% concentrations in investor collateral increased slightly more than their respective cohorts last month. The 15yr investor pools increased 6.6 CPR to 18.7 and 30yr investor collateral were up 4.6 CPR to 18.2. Prepay ratios within this cohort rounded out 2014 with investor pools paying 1.18x and 1.14x for 15yr and 30yr pools respectively.

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FNMA 15-Year 2010s 50%-100% Investor

Cohort 50-100% Investor

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FNMA 30-Year 2010s 50%-100% Investor


50-100% Investor Cohort3mo 18 13.76mo 16.6 14.112mo 15.8 13.412mo Prepay Ratio 1.18 1.00

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FNMA 15-Year 2010s Investor %- Avg CPRs (left) | 12mo Prepay Ratio (right)


50-100% Investor Cohort3mo 16.3 14.96mo 16.5 1512mo 15 13.212mo Prepay Ratio 1.14 1.00

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FNMA 30-Year 2010s Investor % - Avg CPRs (left) | 12mo Prepay Ratio (right)

January 2015



Geographic DistributionThe 1mo lag in Geo speeds showed most state pools falling in November with a few exceptions. The fastest 30yr state speeds in 2014 came from Nevada with the slowest in Puerto Rico.

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FNMA 15-Years by Geographic Distribution

CA FL NY TX US

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CA FL NY TX US

NY TX CA FL US3mo 9.3 12.0 13.4 11.9 11.76mo 9.6 13.3 13.2 12.5 12.012mo 9.2 12.5 11.5 12.5 11.112mo Prepay Ratio 0.83 1.13 1.04 1.13 1.00

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Prepay Ratio CPR


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PR HI NY DE MN CT PA MD WI VA Avg GA MO WV TN KS FL TX AZ MI NV

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FNMA 30-Year Speeds by State

Slowest 10 Fastest 10

January 2015



Origination ChannelAfter 3 months of increasing speeds, Third-Party Originated pools fell within Fannie 15yrs of 2010 while retail pools slightly increased. Fannie 30yrs of 2010 showed both TPO and retail pools inch up slightly.

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FNMA 15-Year 2010s by Origination Channel

100% TPO 100% Retail

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FNMA 30-Year 2010s by Origination Channel

100% TPO 100% Retail

Servicer ConcentrationQuicken picked back up in December at 23.6 CPR within Fannie 15yr 4s of 2010. Their average 6mo and 12mo CPRs have converged, indicating the servicer has yet to let up with solicitation efforts of their servicing book.

0 5 10 15 20 25

QUICKEN LOANS INC.

PNC BANK, N.A.

ROUNDPOINT MORTGAGE SERVICING CORPORATIO

FIFTH THIRD BANK

BANK OF AMERICA, N.A.

WELLS FARGO BANK, N.A.

OCWEN LOAN SERVICING, LLC

PHH MORTGAGE CORPORATION

JP MORGAN CHASE BANK, NA

SUNTRUST MORTGAGE INC.

CITIMORTGAGE, INC.

6mo, 12mo CPRs - FNMA 15-Year 2010 4s by Servicer

6mo CPR

12mo CPR

January 2015



Credit Score

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FNMA 15-Year 2010 by Credit Score

Cohort 0-699 700-759 760-900

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FNMA 30-Year 2010s by Credit Score

Cohort 0-699 700-759 760-900

0-699 700-759 760-900 Cohort3mo 15.3 15.4 13 13.76mo 15 15.8 13.4 14.112mo 16.3 15.3 12.5 13.412mo Prepay Ratio 1.22 1.14 0.93 1.00

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0-699 700-759 760-900 Cohort3mo 16.2 16.8 13 14.96mo 16.8 16.8 13.1 1512mo 15.2 14.8 11.5 13.212mo Prepay Ratio 1.15 1.12 0.87 1.00

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January 2015



Loan-to-Value

0-79 80-89 90-99 100-125 Cohort3mo 14.3 18 16.8 16 14.96mo 14.3 18.4 17 15.5 1512mo 12.6 16.3 14.3 13.9 13.212mo Prepay Ratio 0.95 1.23 1.08 1.05 1.00

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FNMA 30-Year 2010s by LTV

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CPR

FNMA 30-Year 2010s by LTV

Cohort 0-79 80-89 90-99 100-125

January 2015



Cpn % Chg CPR Chg Dec CPR Nov CPR % Chg CPR Chg Dec CPR Nov CPR % Chg CPR Chg Dec CPR Nov CPR % Chg CPR Chg Dec CPR Nov CPR10-Year 2.5 12% 1.0 9.3 8.3 1% 0.0 8.7 8.7

3.0 10% 1.1 12.5 11.4 8% 0.9 11.6 10.83.5 13% 1.7 14.6 12.9 10% 1.3 14.9 13.64.0 10% 1.5 16.9 15.4 12% 1.6 14.8 13.2

All 10y 12% 1.2 11.3 10.1 6% 0.6 10.5 10.0

15-Year 2.5 16% 0.9 6.5 5.6 8% 0.5 6.4 5.9 -8% -0.7 7.8 8.5 6% 0.4 7.2 6.73.0 15% 1.3 9.6 8.3 9% 0.8 9.2 8.4 20% 1.9 11.0 9.2 9% 0.9 11.2 10.33.5 19% 2.0 12.2 10.2 14% 1.5 12.3 10.7 -3% -0.4 14.2 14.6 2% 0.4 20.4 20.04.0 21% 2.8 16.4 13.5 11% 1.6 16.1 14.5 15% 2.0 15.3 13.3 3% 0.5 17.4 16.94.5 14% 2.2 17.3 15.1 9% 1.5 17.5 16.0 29% 3.8 17.2 13.4 20% 3.2 19.0 15.85.0 19% 2.7 17.5 14.7 13% 2.0 17.7 15.6 12% 1.6 15.4 13.8 -18% -2.6 11.9 14.55.5 15% 2.4 18.0 15.6 11% 1.7 17.3 15.6 36% 4.5 17.1 12.6 73% 8.6 20.5 11.9

All 15y 17% 1.5 10.3 8.8 10% 0.9 10.1 9.2 11% 1.3 13.2 11.9 5% 0.6 12.6 11.9

20-Year 3.0 15% 0.8 5.8 5.1 4% 0.2 5.4 5.33.5 12% 1.0 10.1 9.0 21% 1.5 9.0 7.54.0 21% 2.4 14.1 11.7 20% 2.3 13.9 11.64.5 28% 4.0 18.6 14.6 20% 2.9 17.9 15.05.0 21% 3.1 17.6 14.6 13% 2.0 17.6 15.5

All 20y 16% 1.5 10.6 9.1 16% 1.4 10.7 9.2

30-Year 3.0 21% 1.0 5.9 4.9 11% 0.6 5.4 4.8 12% 1.1 10.2 9.1 9% 0.8 9.8 9.03.5 15% 1.1 8.7 7.6 8% 0.6 7.9 7.3 12% 1.6 14.9 13.3 17% 2.3 15.3 13.14.0 17% 2.3 15.3 13.0 15% 2.0 15.5 13.6 8% 1.2 16.5 15.3 10% 2.0 21.8 19.94.5 22% 3.3 18.6 15.3 20% 3.1 18.6 15.6 7% 1.2 18.9 17.7 9% 1.7 20.9 19.25.0 14% 2.5 19.9 17.4 14% 2.6 21.1 18.5 6% 1.0 18.8 17.8 5% 1.0 19.6 18.75.5 15% 2.9 21.8 18.9 12% 2.4 22.9 20.5 0% 0.1 19.9 19.8 5% 1.0 20.7 19.86.0 14% 2.7 22.8 20.1 7% 1.5 22.8 21.3 2% 0.4 19.9 19.5 0% 0.1 21.7 21.6

All 30y 17% 1.9 13.5 11.5 13% 1.6 13.8 12.2 7% 1.1 16.7 15.6 11% 1.7 17.1 15.4

Prod % Chg CPR Chg Dec CPR Nov CPR % Chg CPR Chg Dec CPR Nov CPR % Chg CPR Chg Dec CPR Nov CPR2014 14% 1.0 8.2 7.22013 33% 7.8 31.6 23.82012 33% 9.0 36.6 27.62011 31% 5.6 23.4 17.8

All 3x1 25% 4.6 23.0 18.3

2014 0% 0.0 18.0 18.02013 3% 0.7 22.0 21.32012 32% 6.2 25.4 19.22011 21% 4.5 25.8 21.42010 11% 2.4 24.5 22.22009 -9% -2.0 19.8 21.8

All 5x1 10% 2.0 22.4 20.4

2008 14443% 57.2 57.6 0.4 -97% -19.3 0.5 19.82007 2523% 13.3 13.8 0.5 14901% 42.6 42.9 0.32006 81% 3.6 8.0 4.4 107% 8.5 16.5 8.02005 13% 0.9 7.9 7.0 48% 4.8 14.8 10.12004 19% 2.0 12.6 10.6 29% 3.5 15.5 12.0

All 7x1 15% 1.6 12.2 10.6 48% 5.0 15.4 10.5

2007 15% 1.9 14.5 12.6 151% 29.6 49.2 19.62006 -92% -57.5 4.9 62.4 -16% -4.5 24.0 28.52005 -59% -30.5 21.5 52.0 16% 4.1 29.3 25.22004 557% 3.5 4.2 0.6 23% 3.1 16.7 13.6

All 10x1 -64% -18.9 10.6 29.5 17% 3.2 21.5 18.3

Hybrid MBS - CPR Change

Fixed MBS - CPR ChangeFNMA FHLMC GNMA I GNMA II

10x1 Treas

FNMA FHLMC GNMA

3x1 Treas

5x1 Treas

7x1 Treas

Prepayment Chart Book

January 2015



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10-Year FNMA Historical Speeds by Coupon

2% 2.5% 3% 3.5% 4% 4.5%

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10-Year FHLMC Historical Speeds by Coupon

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2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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GNMA 3x1 Historical Speeds by Production Year

2014 2013 2012 2011 2010 2009

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GNMA 5x1 Historical Speeds by Production Year

2014 2013 2012 2011 2010 2009

January 2015



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15-Year GNI Historical Speeds by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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15-Year GNII Historical Speeds by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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30-Year GNI Historical Speeds by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%

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30-Year GNII Historical Speeds by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%

2% 2.5% 3% 3.5% 4% 4.5%Dec-14 6.3 8.3 11.4 12.9 15.4 15Nov-14 6.8 9 12.3 14 17.1 19.9

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Monthly Change - FNMA 10-Year by Coupon

2.5% 3% 3.5% 4% 4.5%Dec-14 6.4 9.2 12.3 16.1 17.5Nov-14 5.9 8.4 10.7 14.5 16

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CPR

Monthly Change - FHLMC 10-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Dec-14 6.5 9.6 12.2 16.4 17.3 17.5 18Nov-14 5.6 8.3 10.2 13.5 15.1 14.7 15.6

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CPR


2.5% 3% 3.5% 4% 4.5% 5% 5.5%Dec-14 6.4 9.2 12.3 16.1 17.5 17.7 17.3Nov-14 5.9 8.4 10.7 14.5 16 15.6 15.6

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CPR


3% 3.5% 4% 4.5% 5% 5.5% 6%Dec-14 5.1 9 11.7 14.6 14.6 15.2 16.3Nov-14 5.6 8.8 12.7 17.3 18.1 18.5 18.8

02468

101214161820

CPR


3% 3.5% 4% 4.5% 5% 5.5% 6%Dec-14 5.3 7.5 11.6 15 15.5 14.8 13.7Nov-14 5.5 7.6 13 18.4 18.5 18.4 15.8

02468

101214161820

CPR


January 2015

INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The data provided in these reports is for informational purposes only and is intended solely for your private use. Information herein is believed to be reliable but The Baker Group LP does not guarantee its completeness or accuracy. Opinions constitute our judgment and are subject to change without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your Baker representative. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.



3% 3.5% 4% 4.5% 5% 5.5% 6%Dec-14 5.9 8.7 15.3 18.6 19.9 21.8 22.8Nov-14 4.9 7.6 13 15.3 17.4 18.9 20.1

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5

10

15

20

25

CPR


3% 3.5% 4% 4.5% 5% 5.5% 6%Dec-14 5.4 7.9 15.5 18.6 21.1 22.9 22.8Nov-14 4.8 7.3 13.6 15.6 18.5 20.5 21.3

0

5

10

15

20

25

CPR


2.5% 3% 3.5% 4% 4.5% 5% 5.5%Dec-14 7.8 11 14.2 15.3 17.2 15.4 17.1Nov-14 8.5 9.2 14.6 13.3 13.4 13.8 12.6

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Monthly Change - GNMA 15-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Dec-14 6.7 10.3 20 16.9 15.8 14.5 11.9Nov-14 7.5 11.7 17.7 17.7 15.1 17.4 26.5

0

5

10

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30

CPR

Monthly Change - GNMAII 15-Year by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%Dec-14 10.2 14.9 16.5 18.9 18.8 19.9 19.9Nov-14 9.1 13.3 15.3 17.7 17.8 19.8 19.5

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CPR

Monthly Change - GNMA 30-Year by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%Dec-14 9.8 15.3 21.8 20.9 19.6 20.7 21.7Nov-14 9 13.1 19.9 19.2 18.6 19.8 21.6

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5

10

15

20

25

CPR

Monthly Change - GNMAII 30-Year by Coupon

mbs market strategies - the baker group · mbs market strategies january 2015 page 1 drew simmons...

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